The Costs of Not Fixing a Broken Financial System “Probably the best way forward is to set a hard cap on bank liabilities as a percent of gross domestic product; this is the appropriate scale for thinking about potential bank failures and the cost they can impose on the economy. Of course, there are technical details to work out — including how the new risk-adjustment rules will be enacted and the precise way that derivatives positions will be regarded in terms of affecting size. But such a hard cap would the benchmark around which all the specifics can be worked out.” The Baseline Scenario 12/05/2009
Voting twice: A new approach to the limitation of government debt accumulation “How might we limit the accumulation of public debt by democratic governments? This column proposes “voting twice” – first for a deficit ceiling and second for a particular budget. Such a procedure might strike a balance between flexibility and the commitment to refrain from loading debt onto future generations. VOXeu.org 6/17/09
Depression Lurks Unless There’s More Stimulus: Robert Shiller “In the face of a similar Depression-era psychology today, we are in need of massive pump-priming again. We appear to be in a much better situation due to the stronger efforts to date. Still, there is a danger that, because of a combination of faulty economic theory and inadequate appreciation of human psychology, as well as deep public anger, we will not continue with such stimulus on a high enough level.” Bloomberg 4/15/09
IMF poised to print billions of dollars in ‘global quantitative easing’ “However, economists warned that the scheme could cause a major swell of inflation around the world as the newly-created money filters through the system. The idea has been suggested by a number of key figures, including billionaire investor George Soros and US Treasury adviser Ted Truman.” UK Telegraph 3/16/09
How to Repair a Broken Financial World “Rather than tackle the source of the problem, the people running the bailout desperately want to reinflate the credit bubble, prop up the stock market and head off a recession. Their efforts are clearly failing: 2008 was a historically bad year for the stock market, and we’ll be in recession for some time to come. Our leaders have framed the problem as a “crisis of confidence” but what they actually seem to mean is “please pay no attention to the problems we are failing to address.” NY Times 1/3/09
The 28-33% Mortgage Payment Rule: Confronting Reality “I.e. the question offered should be: “would the monthly payment for a fixed APR, market rate mortgage for this particular individual be in the 28-33% (dependant on income level) range?” If the answer is yes then this is an individual that can possibly be helped, if not then you’re just delaying the inevitable for that homeowner as they’ve just gone from a financially unmanageable situation to one that’s slightly less so. Individuals who fit in the latter category would be better served if they were provided assistance that would help them to move on to a more sustainable housing situation, as opposed to trying to enable them to stay in their homes at all costs.” Seeking Alpha 11/18/08
“Today the debate over who should create the national money supply is rarely heard, mainly because few people even realize it is an issue. Politicians and economists, along with everybody else, simply assume that money is created by the government, and that the “inflation” everybody complains about is caused by an out-of-control government running the dollar printing presses. The puppeteers working the money machine were more visible in the 1890s than they are today, largely because they had not yet succeeded in buying up the media and cornering public opinion.
Economics is a dry and forbidding subject that has been made intentionally complex by banking interests intent on concealing what is really going on. It is a subject that sorely needs lightening up, with imagery, metaphors, characters and a plot; so before we get into the ponderous details of the modern system of money-based-on-debt, we’ll take an excursion back to a simpler time, when the money issues were more obvious and were still a burning topic of discussion. The plot line for The Wizard of Oz has been traced to the first-ever march on Washington, led by an obscure Ohio businessman who sought to persuade Congress to return to Lincoln’s system of government-issued money in 1894. Besides sparking a century of protest marches and the country’s most famous fairytale, this little-known visionary and the band of unemployed men he led may actually have had the solution to the whole money problem, then and now . . . .”